The research presented in this thesis considers the question of whether individual-level risk preferences are consistent or inconsistent across decision domains. For example, do people make the same decisions with respect to work, health and finance? Some previous authors have suggested that risk preferences are inconsistent, e. g. Kahneman and Tversky (1979), while others have put forward the idea that people have generalised tendencies to take or avoid risks, e. g. Sitkin and Pablo (1992). The work of Sitkin and Pablo was drawn upon to develop hypotheses concerning the conceptualisation and construction of risk propensity. Risk propensity was operationalised as the degree of consistency of cross-domain risk preferences. It was proposed that a propensity to take or avoid risks is associated with whether individuals have consistent tendencies across different decision domains, that personality will be a key predictor of risk propensity, and that inconsistent cross-domain risk preferences will be associated with risk domain-specific cognitive and emotional aspects of decision making. A survey measure was developed to assess risk and decision preferences both across and within the domains of work, health and finance. Biographical and personality factors were also measured. The sample comprised 360 participants drawn from five sample groups chosen to capture a range of risk preferences. The results showed that risk propensity can be conceptualised and measured in terms of the consistency of cross-domain risk preferences. People who were consistent in their risk preferences were characterised by the personality traits of emotional stability, low extroversion, low openness and high agreeableness. Additionally, consistent risk preferences were associated with relative consistency of attention to situational information and perceived risk. The majority of participants, however, had different risk preferences in different domains, and showed variability in their decision preferences. The implications of the research for understanding risk propensity and risk management are discussed.

Background: Asset prices, investment choices, and market mood can all be greatly impacted by macroeconomic factors and risk perception. Therefore, for investors, portfolio managers, policymakers, and regulators looking to negotiate the complexity of financial markets, knowing how macroeconomic factors affect risk is crucial. Objective: This study delves into the intricate relationship between macroeconomic indicators and market risk propensity, offering a comprehensive analysis of both cross-sectional and panel data. Focusing on key factors such as inflation, interest rates, exchange rates, and the Index of Industrial Production (IPP), this study explore their multifaceted impacts on market risk dynamics. Methods: To reveal the complex linkages that determine risk-taking behaviors and affect business outcomes, the study uses sophisticated econometric methodologies. Results: According to our research, inflation has a significant impact on investor sentiment and corporate profitability. Reduced profit margins and increased market risk are the results of higher inflation. Similar to this, interest rates become an important variable that affects borrowing costs, investment options, and the level of competition on the stock market. Exchange rate fluctuations, which are a key component of the global financial landscape, have been shown to have an effect on investor returns, corporate operations, and dynamics of international trade, which in turn shapes market risk. Additionally, this research reveals the complex relationship between the IPP and stock market performance, wherein good growth in industrial output signifies an expansion of the economy and investor confidence, which in turn affects demand for and the price of stocks. In contrast, a drop in the IPP denotes an economic slowdown and increased market risk. The paper also discusses the unusual impact of the COVID-19 pandemic on international financial markets, emphasizing the interaction between pandemic-induced uncertainty, exchange rate changes, and monetary policy reactions to produce novel market risk dynamics. Conclusion: In conclusion, this study offers a thorough grasp of the interactions between macroeconomic data and market risk inclination. For investors, companies, and politicians looking to comprehend the complexity of the global economic landscape, make educated decisions, and successfully manage financial risks, these insights are essential. Keyword: Propensity Risk, Stock Market, Inflation, Exchange rate and IPP.